Forbearance: What it means and how to access it

Understanding a financial option for homeowners having a difficult time making mortgage payments. The coronavirus pandemic is taking a toll on personal finances, especially for those who have been furloughed, lost their jobs or faced business shutdowns. It’s a small leap to see how this can lead to trouble paying the mortgage. If you find yourself in this position, there is an option that can provide temporary relief: forbearance. What forbearance isn’t and what it is Forbearance is not loan forgiveness. Nor is it the same as programs like Consumers’ Skip a Pay. Forbearance is a formal agreement with your mortgage lender to temporarily pay a lower mortgage amount or pause making payments—often 60-90 days but with COVID-19, borrowers may get longer. After the period of lowered or no payments, you are responsible for making up the payments. While payments are reduced or put on pause, interest is not. Interest continues to accrue during forbearance. How to get forbearance If you’re having difficulty paying your mortgage, it’s better to talk to your lender sooner rather later. Borrowers typically seek forbearances when their income is reduced or lost due to a health emergency, job loss or natural disaster. If COVID-19 has created a financial hardship for you, let your lender know at the first sign you won’t be able to make your mortgage payment and ask for forbearance. If you simply stop making payments, your loan could be in default and this could lead to foreclosure, a damaged credit score and loss of your home. What repayment might look like How you pay back your lender depends on their forbearance terms. At Consumers, all skipped payments, interest and escrow (as applicable) are due in addition to your regular payment at the end of the forbearance agreement. Additional repayment arrangements or modifications may be available on a case-by-case basis if for some reason you can’t pay the total amount due when the agreement ends. Forbearance might affect credit scores long-term A lender may or may not report forbearance to credit bureaus. However, if you find yourself in financial difficulty, it’s preferable to have forbearance on the record rather than late payments or a foreclosure that will certainly damage your credit score. Consumers will not be reporting the delinquency status to credit reporting agencies during the term of a forbearance plan, but credit reporting agencies may still determine there is an increased risk due to other factors, and we are uncertain as to the impact on your credit score. Hopefully, your financial situation has improved by end of your forbearance period and you can repay what you owe according to the terms of your agreement. If not, you will face some tough choices. Selling your home and moving to a less expensive place would protect your credit score. Missing payments and letting your loan go into foreclosure will negatively affect your credit score for seven years. If you are facing difficulties paying your Consumers mortgage loan, let us know. We work with members one-on-one to find solutions that keep families in their homes and weather tough financial times. Call us at 800-991-2221. Consumers provides banking services for more than 100,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want. During the coronavirus confinement, we’re available online, by phone, and by appointment at select offices equipped to maximize safety.